The US Federal Judicial Conference’s Advisory Committee on Civil Rules (the “Advisory Committee”) has proposed a series of amendments to the US Federal Rules of Civil Procedure—the rules that govern the conduct of civil proceedings in the US federal district courts.  Among other issues, the amendments are intended to address and provide for proportionality in the discovery process, as well as the establishment of uniform standards for the imposition of sanctions where a party fails to preserve and produce discoverable information. Joseph G Falcone, a partner in our New York office, outlines the proposals below.

Discovery proportionality amendments

The Advisory Committee proposed a series of amendments to promote discovery that is proportional to the circumstances of the litigation.  Currently, party-controlled discovery encompasses any discoverable information “relevant to any party’s claim or defense,” while court-ordered discovery may further extend to “any matter relevant to the subject matter involved in the action” (Rule 26(b)(1)).  Proposed Rule 26(b)(1), however, would curtail this broad scope by expressly requiring discovery to be “proportional to the needs of the case.”  Proportionality would be assessed by consideration of factors imported from elsewhere in the rule, including the monetary value of the case and the importance of the issues raised, the significance of discovery in resolving those issues, the parties’ resources, and whether the expense of the proposed discovery outweighs its likely benefit (Proposed Rule 26(b)(1)).  The amended rule would also limit discovery to the parties’ actual claims and defences and no longer permit federal judges to grant broader discovery on matters generally relevant to just the “subject matter” of the case. 

The proposed amendments also would reduce the presumptive limits on the number of depositions, written interrogatories, and requests for admissions (Proposed Rules 30(a)(2)(A)(i); 33(a)(1); and 36(a)(2))  Furthermore, the amendments would explicitly confirm the court’s authority (implicit in the current rule, though not frequently exercised) to allocate the expenses of discovery compliance to the requesting party in certain circumstances (Proposed Rule 26(c)), for example the production of electronically stored information (“ESI”).

If adopted, these discovery amendments would reduce the burden and expense that discovery places on litigants in US proceedings.  That relief would be welcomed, particularly by corporate defendants involved in cross-border litigation, since “excessive discovery [still] occurs in a worrisome number of cases, particularly those that are complex, involve high stakes, and generate contentious adversary behavior” (Advisory Committee Comments, at 265).

Preservation and sanctions-related amendments

The proposed changes to Rule 37(e) could significantly impact the document preservation efforts of corporations.  The current rule was added in 2006 to insulate parties from sanctions for failure to produce ESI that was “lost as a result of the routine, good-faith operation of an electronic information system.”  In theory, this rule was to provide a “safe harbour” for litigants whose ESI was destroyed under a good-faith document management policy.  In practice, the rule led to a divergence of approaches by the federal courts in addressing preservation and sanctions issues, which in turn led many corporations to adopt a policy of “overpreservation” (per the Advisory Committee) given the risk that, in some courts, sanctions could be imposed even for negligent or inadvertent failure to preserve ESI.

The proposed amendments would replace the current Rule 37(e) with a single standard applicable to all discoverable information, not just ESI.  If a party fails to preserve information “that should have been preserved in the anticipation or conduct of litigation,” the court may order “curative measures” (such as requiring the party to restore the lost information or provide a summary of it) (Proposed Rule 37(e)(1)(A)).  Under the amended rule, sanctions could only be imposed after a judicial finding that the loss of information caused “substantial prejudice” and was “willful or in bad faith.”  However, under a proposed exception to this general rule, sanctions could still be imposed without a showing of prejudice, willfulness or bad faith if the information loss “irreparably deprived” the other party of “any meaningful opportunity” to prosecute or defend the case (Proposed Rule 37(e)(1)(B)(i)-(ii)).

If adopted, Proposed Rule 37(e) would provide a uniform rule with respect to the imposition of sanctions pursuant to which corporate defendants can undertake reasonable preservation efforts without the need for defensive overpreservation.  That said, while the Advisory Committee asserts that the “irreparably deprived” exception would be available only in “very rare cases” (Advisory Committee Notes at 319), there remains concern that the exception might not be sparingly applied and thus could undermine the proposed uniform standard.

Public comments to date

As of early December 2013, around 350 comments had been submitted on the proposed rule amendments.  The majority were submitted by plaintiff’s attorneys, including class action attorneys, and plaintiff-friendly organisations.  The plaintiff groups generally oppose the amendments as unfairly favouring defendants by limiting the broad scope of discovery upon which US plaintiffs have long relied, and by enabling defendants, in their view, to more effectively resist discovery demands and more easily escape sanctions for discovery and preservation non-compliance.  For their part, defence organisations and corporates generally support the amendments, urging that the very amendments plaintiffs protest would instead restore reasonableness to what can otherwise be a long, disruptive and expensive discovery process.  The defence groups have raised concerns with respect to the proposed amendments to Rule 37(e) and in particular to the “irreparably harmed” exception to the imposition of sanctions, and have urged the Advisory Committee to reexamine that exception, which otherwise threatens the Committee’s goal of ensuring that litigants who make reasonable efforts to comply with their preservation obligations will not be subjected to significant sanctions should information be lost despite those efforts.

Given the foregoing, it is very possible that some of the proposed amendments will be further revised as the process continues.  The Advisory Committee is accepting written comments on the proposed amendments through 15 February 2014, and will hold additional public hearings on 9 January 2014 in Phoenix, Arizona and 7 February 2014 in Dallas, Texas.  The proposed amendments would take effect on 1 December 2015, if they are approved (with or without revision) by, among others, the US Supreme Court, and if the US Congress does not defer, modify or reject the amendments.

The proposed amendments, along with the Advisory Committee’s comments and notes, can be accessed here. To the extent additional information is needed about the proposed amendments or their potential impact, or for further information about or assistance in submitting comments to the Advisory Committee, please contact Joseph G. Falcone on the details above.